Booming chip biz drives up Samsung's profits in Q3

07/10/2018

According to earnings guidance released by Samsung Electronics on Friday, the Korean behemoth earned a consolidated operating profit of almost $15.5 billion from consolidated sales of $57.6 billion in the third quarter of the year, making it the company's most profitable quarter.

Samsung didn't provide any breakdown of the driver of its profit or revenue yet, but CNet said the company has likely benefited from strong demand for its flash memory chips, which made up about 80 percent of its earnings in the second quarter.

The operational profit forecast for the third quarter is higher than the market consensus which was 17.2 trillion won, according to the specialized site FnGuide.

The operating profit to sales ratio came to 26.9 percent, also marking a record high for the company.

Sales from Samsung's chip division are creating big business for the Korean company - which of course, had a challenging Q2 due to the Galaxy S9 smartphone failing to deliver its expected profit growth.

LG did not elaborate on its performance and will disclose detailed earnings in late October. The projected sales are KRW 64-66 trillion, which equates to around $57.5 billion.

Samsung forecast revenues for the third quarter will climb to KRW64-66 trillion, up from the KRW62.05 trillion posted during the same period in 2017.

A senior analyst in South Korea said that dropping chip prices are going to pressure profits while shipments of smartphones are not where they need to be and will continue crimping margins.

Market tracker DRAMeXchange predicts an average price decline of 5 percent for DRAM products in the fourth quarter from the previous quarter, steeper than its previous estimate of declines of as much as 3 percent.

As of 10:07 a.m. on Friday, shares of Samsung Electronics were up 0.56 percent to 44,950 won.

Operating profit in the IT and mobile unit, which makes smartphones, was estimated at about 2 trillion won (1.77 billion US dollars) in the quarter on weak demand for Samsung's new flagship smartphones released this year. Samsung Electronics launched the Galaxy Note 9 in August, but intensifying competition in the global market, especially by Chinese rivals, weighed down on the South Korean tech giant.

The smartphone business, however, is expected to have posted yet another quarterly shortfall for the July-September period.

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